Navigating the potential impacts of AI

While pundits proselytise advances in artificial intelligence (AI), press reporting often swings wildly between predictions of the technology precipitating the end of humanity and heralding the dawn of a new era of progress. The reality undoubtedly lies somewhere in the less dramatic middle, and while there has been much discussion about the potential for AI to result in mass unemployment, the likely longer term potential for AI lies in its capacity to improve productivity and therefore standards of living.

Paul Krugman, in a recent op-ed for the New York Times, points out that at the level of the economy as a whole, worker productivity in the USA has increased about five fold since about 1945 - as a result of various technology advancements - but with no long-term upward trend in unemployment.  While the types of jobs and that are required have changed the overall demand for labour has not.

Krugman more broadly provides a rather fascinating analysis of various technologies and their impacts on productivity, from the electrification of factories to the widespread use and adoption of information technology. The gist is that it takes time between the introduction of a new technology and their impacts on on both productivity and labour market restructuring.  While electric motors became widely available in the 1890s it took about 40 years for people to figure out how to redesign factories to make the most of the technology and to see attendant productivity increases.

Likewise, the microprocessor was invented in 1971 but the productivity increases weren't felt until about 20 years later in the 1990s, which was then interestingly followed by significantly declining productivity growth for the next decade or so. Again, it took people some time to figure out how to use microprocessors: to develop the associated technologies such as mainframe and then personal computers and networking technologies, to manage the organisational change required to utilise IT, and then develop a sufficiently large pool of skilled workers required to successfully embed IT in organisations at scale.

Even 50 years after the introduction of the microprocessor and the IT revolution in the 1990's, many large organisations, including governments, are still going through large-scale digital transformation activities, where paper based processes are converted to digital processes.  Even updating ones drivers licenses here in NSW, which has been a leader in the adoption of digital government services, still requires filling out and submitting paper forms. Organisations and society more broadly takes time to adapt and change after the advent of new technology, particularly ones that prove transformative. Krugman argues the the same is likely with AI. 

While best estimates are that AI’s impacts are likely in the same order of magnitude as the industrial revolution, it is likely to take a significant amount of time for large slow moving institutions to fully realise the benefits and for people to simply work out how to use them to best effect. In contrast to the Industrial Revolution where the impacts were most acutely felt among manual labourers, the effects of the AI revolution will be among knowledge workers - lawyers, software engineers, journalists and marketers to name only a few.

At Praxis, we are actively exploring exciting AI initiatives in healthcare, financial services, and travel. We look forward to sharing these developments with you in the coming weeks and months. Stay tuned!